‘West Coast Port Congestion, The Sequel’

‘West Coast Port Congestion, The Sequel’ Starring the ports of Los Angeles and Long Beach is coming soon to a store shelf near you. I am betting you saw the first movie in this series of blockbuster stories ‘West Coast Port Congestion’ and have been waiting for Part II to come along ever since. Wait no more. Yes indeed, Covid-19 is the gift that keeps on giving.

Due to a Covid related lockdown that started in March 2022 in Shanghai, China, container traffic has slowed through the mega port. Make no mistake, the port is not shut down, but many of those who work there are. Overall Shanghai has done an admirable job keeping containers moving, but volume has slowed creating a backup of containers. According to TT News, “FourKites data from May 3 shows the two-week average shipment volume for loads traveling from China to the United States was down 20% as of April 29, compared with the day before lockdowns went into effect in Shenzhen and Shanghai on March 12. Still, it does show signs of recovery with average shipment volumes being down 36% as of April 20.”

It sounds like the there may be a recovery taking place in Asia to USA shipping as volumes were down 36% as of April 20 and only down 20% as of April 29th. Even though there is progress, the outbound volume decreases have been taking place since March. The deck does not clear at the end of the month and start over like new gigabytes on your phone plan. The continuous subdued volume will snowball in to a bigger and bigger backlog the longer it goes on. So far, it has been since mid-March.

Can you guess where a fair chunk of those backed up containers are going to go when Shanghai becomes fully operational? You guessed it. Long Beach and Los Angeles Ports(LB/LA). For their part LB/LA have done a good job at cleaning up the backlog and congestion so far. The twin ports are not out of the woods yet, but they can see the end of the woods with a cheap binoculars. I hear vessel wait times are down to 10 to 17 days. As of May 6th, 2022, LAX had dwell times of 4.8 days, that number used to be 11, and dock on rail dwell of 5.9 days, that number used be 13.4 during the dark days. Moreover, there are only 15 container vessels in port, 2 in the bay, and 27 drifting or slow steaming to 150 nautical miles out. Life is wonderful right? Yeah LAX… Well done!

What about further out than 150 NM? That is a good question. Yes, the traffic hangs back, but it is there. Think the neighborhood of 35 to 40 on top of the 29 already mentioned. Add another 45 vessels in route from Asia moseying along, more being loaded every day, and Shanghai getting ready to get back to business. This will create a ‘Shanghai’ uptick in traffic that the just recovering west coast port system will have to digest somehow. I cannot see the Shanghai congestion, which really has not even started yet, easing before the late summer just in time for the buying season cargo to come sailing in. With seasonal shippers likely shipping earlier than normal to compensate for expected congestion, LB/LA will have their work cut out for them. Moreover, if the United States has Covid outbreaks similar to China’s recent challenges, I don’t foresee major shutdowns, but there would be slow downs due to labor shortages which would complicate things further.

Something else is happening this Summer. Wait, don’t tell me, I just knew it a second ago… it’s on the tip of my tongue…wait… Oh, I remember! The West Coast Longshore and Warehouse Union labor contract is set to expire this July! The talks between the International Longshore and Warehouse Union and the Pacific Maritime Association are happening right now.

Are the labor talks going to mean anything regarding more congestion? I do not know. What I do know is the Pacific Maritime Association knows the port systems they are representing need automation and need it badly. I also know labor unions do not warm up to automation very well. If I were a betting man, I would wager there will be at least a degree of disagreement at the table about automation. Will assured mutual destruction be enough of a deterrent for the labor talks to go smooth and wrap up before July? That is another thing I do not know.

I am tired of not knowing things so I will get back to something I do know. If labor talks do not go well and there is a labor slow down, and if there is a major uptick in container traffic from Asia to the US West Coast over the coming months, and the USA has Covid outbreaks slowing supply chains, the result may be us all being able to walk to Asia on top of waiting vessels and never get our feet wet.  This would create a whole new round of shortages that would ripple through various industries. Since there are already lingering shortages, expect the next round to be even more unpleasant. I know that all sounds a little melodramatic, but all the ingredients are potentially there. If the dominos all fall the wrong way at the wrong time, things will get very 2021, or worse, quick. Isn’t Doomsday forecasting fun?

Will it happen? I am back to not knowing. Can it happen? Sure, it could. Covid is not gone, just quite right now. The buying season is coming quick, there is pent up volume in Shanghai, and the labor talks are happening. Would union labor and management be that foolish? It would not be the first time two drunk fishermen went down with the boat because they were busy arguing about which one was going to fix the hole.  If either had lived, they would tell you it was about the principle of it.

It is about time to start keeping an eye on the vessel count off the west coast again. At the same time, keep track of the Longshore and Warehouse Union labor talks. Covid is like harsh weather, you never know when it will come and ruin your party, and the buying season will come. Since you cannot do anything about the weather, the buying season is a given, and container volume increase timing is not in our control, we can just keep watch and develop contingency plans. If one, some, or all, of the factors, do not appear they are going the right way, run out and buy that TV you have been thinking about. It may not be there to buy after the summer.